Bill Gross: "Don't Cry For Pimco" And Yes, "We Are Certainly Underweight Treasurys"

Tyler Durden's picture

Recently Bill Gross appeared on CNBC stating that contrary to what some "blog" had said, the firm was not short bonds. This provoked said "blog" to pen a response (actually two) to this somewhat misleading statement, which we equated to someone claiming they are long x million in cash exposure offset by y billion in synthetic. Today, when interviewed by Bloomberg TVs' Tom Keene, Gross declined to refuse he was short treasuries (in fact, ignored the topic entirely), merely saying the following: “We're not overweight Treasuries. We're certainly underweight Treasuries, but that does not mean we don't own lots of other bonds...It does not mean as well that we're not a little bit shy in terms of duration." And once again the bottom line, and what it is really all about: "We’re having a good don't cry for Pimco." Simply said, Gross is concerned by what traditionally skittish fund investors will think about the fund manager being correct (yes, Gross is correct to be short bonds, especially in the long-run) but being late. That is understandable. But making statement such as Pimco is not short market, and especially duration equivalent exposure, that is both misleading and condescending. Far more from the Pimco boss in the full interview.

Gross on the implication of U.S. low borrowing rates for savers:

“It means that savers are being disadvantaged and will be disadvantaged for perhaps five, ten to fifteen years relative to debtors."

"What policymakers are trying to do is rebalance this imbalance in terms of too much debt and too attractive rates on savings.  What happens since 1946 to 1979 in the UK and the U.S., in order to rebalance balance sheets, was that the U.S. basically kept interest rates at 2.5% for much of that period of time and offered substantially lower real interest rates. That is what will be done here, and basically, it is called financial repression. We call it pocket picking. We simply suggest that investors look into other areas in order to achieve returns. “

On whether consumers should buy equities instead of bonds:

“I think so. Our recent secular forum suggests a bumpy territory…to the extent that G7 countries grow at 2% and to the extent that emerging and developing grow at 5 to 6% and those are our main level assumptions, then equities do make some sense. They do offer real returns in the form of a dividend yield than can grow approximately 1.7 to 2% or more in various countries.  Compare that to real rates of interest in the United States on a 7-year on a -1%.”

On whether the Treasury 10-year yield will drop below 3%:

“I don’t think so. We have the end of QE2 at the end of June and that subtracts about $1 trillion of annual purchasing power the Fed will not be buying. I would be the first to admit that there is not enough data because QE1 and QE2 was such a short period of time to suggest what might happen afterwards. I simply think that yields would probably go higher as opposed to lower if only because we wonder who will buy Treasuries when the Fed does not buy Treasuries. At these levels, at these negative real interest rates, let's look to other countries, let's look to corporate bonds as opposed to Treasuries. “

On Pimco’s position in Treasuries:

We're not overweight Treasuries. We're certainly underweight Treasuries, but that does not mean we don't own lots of other bonds. German bunds and Canadian bonds are rallying. We simply think those are better alternatives. It does not mean as well that we're not a little bit shy in terms of duration. We’re having a good don't cry for Pimco.”

“What we are trying to do is find some countries that are less financially repressed…In the United States, the policy rate at 25 basis points is about 300 basis points less than inflation. That, along with the examples in the UK, are financially repressive, meaning that investors earn a substantial amount less than inflation. We want countries where we can do better than that.”

On whether he sees softening in consumption by the U.S. consumer:

“We continue to see low growth, not just in the U.S., but globally. On a domestic and global basis, I think it is clear we are not building houses for each other and there are not enough jobs to go around."

"It is not that demand is satiable -- it never is. It’s just that the financial system and the stability of existing systems to facilitate it aren’t in working order.  Because of that, jobs will go to countries with the cheapest labor and policymakers will tend to make their country the labor market of choice via financial repression and currency depreciation.”

Gross on whether the Great Moderation is over:

“The Great Moderation in terms of steady and high real growth rates is over…What we experienced over the past 30 years in terms of real interest rates is a 10-year that basically traded close to nominal GDP. What we have right now is a 10-year at 3.06, which is trading perhaps 1% to 2% under nominal GDP going forward. Therein lies the difference. Savers are being disadvantaged and it pays them to look for alternatives.”

PS. We certainly won't cry for Bill. Below are some pics of the man's (well-deserved) $23 million Harbor Island mansion.

billgrosshouse2 billgrosshouse4 billgrosshouse3
billgrosshouse5 billgrosshouse6 billgrosshouse7
billgrosshouse81 billgrosshouse9 billgrosshouse10

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augie's picture

uh oh, looks like someone is putting the heat on gross.

camaro68ss's picture


XRAYD's picture

"We’re having a good don't cry for Pimco."


Not Argentina?

Trillax's picture

+1 LOL.  I thought the same thing when I saw it then caught myself changing the lyrics around to fit the situation.  Something including 'biting the pillow' and a form of lubirication. ;)

SheepDog-One's picture

Bill Gross keeps saying 'dont cry for Pimpco'...I wasnt even the least bit sad, why would he think I was crying for him? Weird.

LawsofPhysics's picture

Stand tall Bill! hurricane insurance is paid up right?

kito's picture

bill looking foolish and getting his ass handed to him by the fed--don't turn against your own bill, you will get lashed

buzzsaw99's picture

wHY CAn't PIMPCO get someone more pleasing to the eye to make these presentations?

augie's picture

because anyone with half a brain and a decent rack already works for the enemy?

LowProfile's picture

Gross is looking due for a nut squeeze.

Boston's picture

It was a big call, and he got it totally wrong.....for now.  Shorting time, for Treasuries, could be only a couple of months away.

Reminds me of his "the great 25 year bond rally is over" call in.......2007.

Mercury's picture

Well he wasn't quite talking his book then as he delivered a pretty handsome 9.07% in the TRF that year.

Mercury's picture

Unlike a lot of fund managers who probably think Zero Hedge is the name of their wife's SoHo body waxing salon, I think Gross is likely pretty keen on this site. 

I can understand why he wouldn't want to go into specifics on TV about his net Treasury position but his views seem to mesh pretty well with most of the major themes around here.  From the tone of some of his recent letters he certainly seems salty enough to be simpatico.

augie's picture

Zero hedge will never mean the same thing to me again.

Tyler Durden's picture

Time for a logo redesign...

DK Delta's picture

Except Bill Gross continues to say that QE2 means the END OF QUANTITATIVE EASING, which is the EXACT OPPOSITE of what is said here. 

ZH produces amazing stuff, but they are 100% on the QE3,4,5...bandwagon. 

JuicyTheAnimal's picture

I moved my 401K into his fund when I read here that he went short.  I'm not worried about it for a two good reasons.  I only contribute what is matched and I most likely won't make enough money to ever retire for one.  For two, I have no other choices that are the least bit rational.  Oh well.  At least I don't have to rape hotel maids to get laid. 

NotApplicable's picture

I stopped contributing to mine three years ago and used the money to buy Silver Eagles. Even with the loss of matching funds (the only reason I ever did it), I'm still coming out far, far ahead of any fund choice in my 401.

Clowns on Acid's picture

Seems Bill has realized that when Nancy Pelosi calls on behalf of Lil Timmy G., and tells him, "First comes love, 2nd comes marriage" Bill gets fitted for a dress. 

RobotTrader's picture

Only a matter of time before PIMCO starts "putting to work" that $90 billion cash horde.

Performance anxiety starting to seep in, Mohammed "Sugar High" El-Erian probably chugging a few Red Bulls right now, watching the huge boner runs on stocks like Starwood Hotels and Wyndham Worldwide, both up 4%+.

Lots of guys are way underinvested, scared to death of another 2008 commodity crash and/or PIIGS blowup.

topcallingtroll's picture

And with fed funds rate still accomodative it now seems unlikely we will have a major market swoon, one of those five percent bear markets perhaps might be all we see.

I am about to capitulate and go back into risk assets for what its worth.

baby_BLYTHE's picture

If you seriously believe that, take a look at Ben's predictions.

Trusting in a man that has never gotten anything correct in his life, dangerous move IMHO.

topcallingtroll's picture

I dont know what to believe any more, but i havent capitulated on my risk off thesis yet.

augie's picture

bullish for capitulation.

disabledvet's picture

aww.  you mean "trusting an economist."  that's one likes a "on the one hand/on the other hand" kind of guy.  my own view has always been "beware the guy who says what he means/means what he says" though, too.  i'm a happy medium myelf.

lieutenantjohnchard's picture

project much? looks like you just gave the board a glimpse into your own mind.

1) you're 30% invested

2) your hd, mo, vz are laggers of the first order

3) you always troll the nyse for the biggest movers, dreaming of hitting the big one

4) telling the board you live on power juices etc ....


tickhound's picture

A tribute from the grave...

To the Reverend Robo, from the Church of What's Workin' Now.

disabledvet's picture

done it all of last year and into this.  too bad i don't believe in the money thing to begin with.  C'est la vie...

Cone of Uncertainty's picture

A little off topic, but people should check out this excellent piece about the ECB balance sheet and all that donkey turd shit crap paper they have taken on as collateral.


topcallingtroll's picture

I suspect we overthink things to our detriment.

If nobody on the street can explain QE then it is doubtful donkey turd paper will matter.

Just btfd i guess.

RobotTrader's picture

S & P 500 has run 15 pts in 3 hrs without hardly a down tick, wow bears run over hard again today.

For 2 years now its been a tough time to be a short.  The market has never gone straight down to reward shorts. Longs have seen paradise 1000 times.  Being an all short trader is a tough way to make a living.

augie's picture

do you ever just sit back and marvel at what an awesome troll you are? To bad you can't put that talent to use in real life, or that class you so desperately want to join might use you.

augie's picture

I always say i'm from the deep south, and no one ever gets it.

baby_BLYTHE's picture

it's because you have to do that weird ass laugh to follow it up

disabledvet's picture

perhaps your suffering has been overestimated.

topcallingtroll's picture

Yeah its not fair.

I have to work hard for my junks.

Robo gets them without even trying.

StychoKiller's picture

There, gave you a "mercy" junk -- feel better now? :>D

monopoly's picture

Tough to play against rapists, thieves and Fed Reserve bankers. I keep 200 shares of TBT just so I can track it easier. If it is not in the portfolio, easy for me to miss it. Down 2% but since it is just a tracker, no big deal. At some point it will fly high and then I will load up the boat. Not worth shorting this market and will not buy PCLN that some advocate, hmmm, so miners, physical, and some confetti works fine for me.

Yeah, AMZN may go to 250, but not with me. Will not play a crooked table.

Cone of Uncertainty's picture

GDP down.

Claims up.

Priors revised weaker.

Personal Consumption weaker than expected.

Bloomberg Consumer Comfort weaker than expected.

S&P500 up proves we are all fucked.

tickhound's picture

This smells of a Hollywood production to me... Right on schedule and by design.

monopoly's picture

Well for once, Robot is right on. Shorting this market is for masochists who like to suffer; If you are really good, (I am not), you can get maybe 3 4 days of good shorts but so tough to time. So, as posted, just do not go there. Now, when reality sets in, that will be different.

Mec-sick-o's picture

Does Pimco is one of the too big to fail?

Or too big to not make noise.

Perhaps having zero exposure to US treasuries will hint the others to rush to exit door?


monopoly's picture

You have to wonder with the inmates pushing rates so low.....what are they afraid of???? Inquiring minds would like to know.

friendly manitoba's picture

well i listened to bill answer questions off the top of his head for 7 minutes - he is exactly right in my opinion ... curious why previous posters cant see his logic

too bad that he isnt working for  the president 

his voice  is raspy  for the same reason roubini's is distinctive - they  are so brilliant that people keep asking them what to do  - and in bill's case let them invest their billions

oldmanagain's picture

First, don't think Gross has any duty to reveal his position in any detail.

Pimco's record is much better than his critics.

What he said originally was that he was over hedged by 23%.  However we do not know the risk the hedges represent or percentage of real capital.  Sometimes a batch of cheap puts will go a long way in covering exposure.  As the bonds rally, he may be unloading even more as he thinks 3% on the ten year is about as low as yields can go.


The fullness of time will reveal who eats the crow.

NotApplicable's picture

I simply think that yields would probably go higher as opposed to lower if only because we wonder who will buy Treasuries when the Fed does not buy Treasuries.

Like the Fed is ever going to stop buying. Oh wait, I forgot that QE3 can't start until everything falls apart. So, I guess they'll quit for a couple of days, as it shouldn't take long to push this buggy over the cliff.

THE DORK OF CORK's picture

The man looks like Sam Shepard but without the cool exterior.

I guess he has been riding the Dollar Starfighter since the 70s 


 "Hey Riddley,    got any credit – loan me some and I will pay you back later”
The post 71 $ system was doomed from the outset – its been one hell of a ride though

Ejection is always a option